Northeast Region Leads the U.S. in Rent Growth
As pricing power deflates across the nation, the Northeast apartment region has taken a record lead over other U.S. regions.
The Northeast is already one of the most expensive apartment regions nationwide, and as such operators in this region generally don’t raise rents to the extent of other locales. When extreme price hikes hit the U.S. apartment market in 2021 and 2022, the Northeast did see historical rent growth, but not quite to the extent of some other areas (looking at you, South and West regions).
After the peak, when the inevitable fall of 2023 occurred, rental rates in the Northeast didn’t suffer as much necessary correction as other regions. In fact, while operators in the South and West have turned to price cuts recently, rent growth remains the norm in the Northeast and Midwest regions.
The Northeast region is the national leader, with average effective asking rents up 3.1% year-over-year, according to September data from RealPage Market Analytics. That performance was ahead of the U.S. norm (0.1%) by 300 basis points (bps), the biggest lead the Northeast has had over the national average in at least a decade.
In fact, that’s an inverted pattern from what the Northeast usually sees, as rent growth here tends to run at or behind the U.S. average. In 2013 through mid-2018, Northeast rent growth ran an average of about 130 bps below the national norm. Starting in September 2018 to October 2020, Northeast rent change ran right alongside the U.S. average, and then started falling behind again during the big hikes of 2021 and 2022.
Still, rent growth of 3.1% is not a phenomenal performance in the Northeast, and is a shade behind the 10-year average of about 3.5%. Instead, this nation-leading performance is less about big hikes in the Northeast and more about the loss of rents in other regions nationwide, due to supply pressure deflating pricing power.
This link between new apartment completions and pricing power becomes clear when examining the top rent growth markets across the Northeast, which all have seen relatively low levels of inventory growth in the past year.
A handful of smaller apartment markets were the rent growth leaders for the Northeast region. Springfield – with an existing unit base of about 46,000 units – logged price hikes of 8.7% in the year-ending September. In fact, this was one of the best showings nationwide, beat out by only the performances in Midland/Odessa (13.8%) and Madison (8.8%). Allowing some breathing room, no new apartment completions were delivered in Springfield in the past year.
Other small Northeast markets with annual rent growth above 5% were Rochester, Trenton and Providence. Of these, only Trenton logged a reasonable amount of new apartment supply in the past year, but this is also the smallest existing base at less than 30,000 units.
Newark is the only major apartment market to show up in the top rent growth leaders list in the Northeast. With a price increase of 4.3% in the year-ending September, Newark was also the best performer among the top 50 apartment markets. Annual inventory growth in Newark was 1.9% – tying Portland as the biggest increase among the Northeast’s top pricing performers.